Which of the following equations is correct?
A) Growth rate of nominal GDP = Inflation ‒ Growth rate of real GDP.
B) Growth rate of nominal GDP = Inflation + Growth rate of real GDP.
C) Growth rate of nominal GDP = Inflation ÷ Growth rate of interest rates.
D) Growth rate of nominal GDP = Growth rate of interest rates ÷ Inflation.

Question

Quizplus · Accepted Answer

The growth rate of nominal GDP is the sum of the inflation rate and the growth rate of real GDP. This is because nominal GDP includes the effects of both price changes (inflation) and changes in real output (real GDP). Option A is incorrect as it subtracts the real GDP growth rate from inflation, which doesn't make sense. Option C is incorrect as dividing inflation by the growth rate of interest rates is meaningless. Option D is incorrect as the growth rate of nominal GDP does not depend on the growth rate of interest rates.

Which of the Following Equations Is Correct